You can dream in any stage of sleep, but REM sleep is the point at which you have the most vivid dreams. It is also what your brain tries to catch up on first when you haven’t been getting enough sleep. If you don’t catch up, you get daytime hallucinations. I do everything I can to avoid driving when I am this tired. I have been in an accident before, albeit, it was plain old falling asleep behind the wheel, it wasn’t braking for a phantasm. I’m terrified of doing that—braking for a person who isn’t really there, and getting rear-ended by a person who is.